Stanford Social Innovation Review
By: Suzie Boss
Back in 2005, Liz Wood was a single parent earning a modest income. She had "never thought buying a home would be attainable," she recalls. Then she spotted a for-sale sign at Duvall Riverside Village, a mobile home park in Duvall, Wash. Although some friends raised eyebrows at her choice, Wood was won over by views of the Snoqualmie River and by the safe feeling she got from the neighborhood. The park, a 4.5-acre site that accommodates 25 factory-built houses, "is a sweet place," she says. What's more, the price for the three-bedroom, two-bath home that she bought "was right-sized for me," Wood says. "I knew I could live within my means here."
There was just one problem: Wood didn't own the land under her home. Like most of the 2.9 million Americans who own factory-built housing, she was renting the site on which her home stood. Soon after Wood and her daughter moved in, they started hearing rumors that the owner of the park might sell the property. "It felt like a bomb had dropped," Wood recalls. Moving her house to a new site--if she could find one--would cost $10,000 or more. "I had this gnawing fear. What was going to happen to us?"
The park owner offered residents a chance to buy the property, but that was hardly a feasible solution. "It meant we'd have to subdivide [the site]," Wood says. "Each of us would need a down payment of $20,000 or more. We didn't have that."
Instead, with commercial financing and technical help from a social enterprise called ROC (Resident Owned Communities) USA, residents formed a nonprofit cooperative to buy and manage the property, now called the Duvall Riverside Village Cooperative. The deal went through in 2012. "Now we live on owned land," Wood says.
ROC USA is leading a nationwide push to change the ownership structure--and the image--of the country's 50,000 manufactured home communities. So far, the organization has helped residents of 56 mobile home parks to purchase those properties. Building on a model pioneered in New Hampshire, ROC USA works with residents to undertake a co-op conversion. Residents buy a membership share that typically costs less than $1,000 per household, and with that share come voting rights and a long-term lease. They continue to pay rent for their home sites, and the rent covers mortgage payments and operating costs for the co-op.
In short, ROC USA aims to help low-income people build a more secure residential future. "We are the most efficient means to resident ownership. And we have the goods to back it up," says Paul Bradley, founding president.
Laying a Foundation
When economist George "Mac" McCarthy arrived at the Ford Foundation in 2000, one task in his portfolio was to identify a strategy for helping low-income people build assets. As part of that effort, he learned something that surprised him: Manufactured housing is the largest source of unsubsidized affordable housing in the United States. Yet buyers have to contend with laws that treat manufactured homes as chattel rather than real property. As a result, when it comes to financing them and assessing their value, they're more like cars than houses. The "trailer trash" stereotype that lingers around factory-built housing posed a challenge as well. Even among affordable housing advocates, "there was outright hostility," McCarthy recalls. "People saw manufactured housing as part of the problem."
Then he learned about the New Hampshire Community Loan Fund (NHCLF), a nonprofit based in Concord, N.H. Starting in the 1980s, NHCLF had enabled nearly 40 conversions of mobile home parks into resident-owned cooperatives. (Today, NHCLF has more than 100 such co-ops in its portfolio.) It had also demonstrated the value of a new loan product. "It was miraculous--not a single default," McCarthy says. He saw the potential to implement the NHCLF approach on a bigger scale.
Working with Bradley, who was then vice president of NHCLF, McCarthy marshaled Ford Foundation resources to expand the New Hampshire program and to build support more broadly for manufactured housing as an asset-building option for low-income families. In 2002, Bradley recalls, a national nonprofit called NeighborWorks America convened a symposium on that topic. "They had a hard time finding three practitioners for a panel," he says.
Gradually, other groups came to appreciate the benefits of factory-built housing. "Done right, manufactured housing plays an incredibly important role in filling the gap for affordable housing," says Andrea Levere, president of the Corporation for Enterprise Development (CFED). Thanks to support from CFED and other groups, a new field began to take shape. In 2007, NeighborWorks convened a second national symposium on manufactured housing, and about 100 people showed up for the event, according to Levere. "That's the pace of change," she says.
In 2008, ROC USA launched as a nonprofit LLC. Four community development organizations, including CFED and NHCLF, contributed start-up capital. "This was CFED's firstever equity investment," says Levere, who now chairs the ROC USA board. NeighborWorks contributed grant funding and brought its network of housing nonprofits into the ROC USA orbit. The Ford Foundation, for its part, has made substantial program-related investments in the enterprise.
The founders of ROC USA gave the organization a roadmap to achieve financial sustainability and a mandate to attract other investors to the sector. The financial crisis that erupted in 2008 made for a slow start, but deal flow has been accelerating since 2011. "Are they financially self-sufficient? Not yet, but they're making good progress," McCarthy says. In nonfinancial terms, though, ROC USA has made significant headway. "We've transformed the landscape," McCarthy says. "We now have strong allies in the affordable housing world. People no longer look at manufactured housing communities as toxic places."
For ROC USA, speed is often a critical factor in getting deals done. "The decision to sell can come quickly," Bradley says, noting that many park owners are mom-and-pop operators who are nearing retirement age. But ROC USA is poised to make an offer when an opportunity strikes, and it's able to provide first-mortgage loans that extend to 110 percent of property value. (To date, the organization has deployed $175 million in project financing.) That means residents don't have to look for additional funding for a down payment. "We've never had to say no to a loan for a lack of capital," Bradley says.
When mobile home park residents first hear about the co-op idea, they tend to respond with disbelief. "Imagine a situation where you have no control over your land," says David Dangler, director of NeighborWorks America's rural initiative. "Then to be told, 'By the way, with your friends, you can actually buy this place.' That's outrageous!"
Although ROC USA has built a national operation, much of the hard work of forming resident-owned cooperatives happens around kitchen tables. That's where local nonprofits affiliated with NeighborWorks America come into play. These organizations provide technical assistance to help residents work through the logistics of obtaining a loan and managing a property. But first they must earn residents' trust.
Many residents "see us as just another business trying to make a buck off them. They look at us with a great deal of suspicion at first," says John Wiltse, senior operations director for PathStone, a mission-driven organization based in Rochester, N.Y., that provides technical assistance in conjunction with the NeighborWorks network.
Sheila Rice, executive director of NeighborWorks Montana, has watched residents' responses shift from "100 percent disbelief" to excitement during a single meeting. "Once they hear that other communities across the country have done this, they get it. You can see their whole demeanor change," she says.
Local technical assistance providers earn a percentage on a loan at closing and also collect a small servicing fee over the life of the loan. "We stick with them forever," says Rice. Along with enabling the formation of a cooperative, professionals like Rice help residents with everything from co-op governance to infrastructure improvement. The impact of this work is evident, she notes: "I see people's entire outlook on life change. The personal empowerment that co-op ownership gives them--it's an amazing thing."
Wood, back in Duvall, Wash., offers a prime example of such empowerment. In September 2013, she became one of the first three co-op residents elected to serve on the ROC USA board of directors. A month later, she attended the Community Leadership Institute, a national event sponsored by NeighborWorks. "You learn how to problem-solve, how to get others involved, how to think outside of where you happen to live," she explains. "And you're there with 2,000 other people, all with a common goal of building their communities."
Bradley, who became an Ashoka Fellow in 2011 for his work in the affordable housing sector, says the decision to open board seats to residents has been a high point of his nonprofit career. "Giving our customers voting power is the thing I'm personally most proud of," he says. "This communicates that we stand shoulder to shoulder with our communities."
In late 2013, Wood traveled to Washington, D.C., to attend her first ROC USA board meeting. She was "a little intimidated," she admits. "These are numbers people--bankers, CEOs. I'm just a worker bee. What do I have to contribute?" But she soon found her voice. "I knew I had to speak up. Here's my chance to connect the people with money to the people they're helping. They can sit and talk about the issues, but I'm the practical application," she says. She offered a message that was probably "a little humbling" to her fellow board members, she recalls: "I reminded them that, no matter where we come from, we all want a warm home in a safe environment."